30/5/15: Irish Retail Sales: April

Some good news on Irish retail sales side for April with latest CSO data showing seasonally adjusted core (ex-motors) sales up 2.65% m/m in April in Value terms to 100.6 index reading - the highest since September 2008. Remember - value series have been lagging far behind the volume series. April 2015 m/m increase comes after 0.31% contraction m/m in March and is a strong signal of a positive momentum returning to the sector.

Volume series continued to perform strongly, jumping 3.07% m/m in April after disappointing 0.65% drop in March. The series now stand at 110.7 which is the highest since July 2007.

Strengthening of the positive correlation between volume (and now also value) of core retail sales and Consumer Confidence indicator is also signalling that we are on an upward trend (remember, Consumer Confidence indicator is pretty useless in timing actual trend reversals, but performs pretty well in tracking trends). Still, rate of increase in consumer confidence indicator is out-pacing increases in retail sales on 3mo MA basis.

3mo MA for Value of core retail sales is up 0.95% compared to previous 3mo period and Volume series 3mo average is up 1.78%. Both series posted declines in 3mo average in March.

As the result of April changes, Value of core retail sales was up 3.16% y/y and Volume of retail sales was up 6.67% y/y - both strong indicators of a positive trend.

Couple of points of continued concern:

• y/y increase in Value (+3.16% in April 2015) is slower than y/y growth rates posted in the series in April 2014 (4.4%) with Volume growth rates basically identical.
• Compared to peak, 3mo average through April 2015 is down 40.6% for Value of sales and down 34.8% in Volume of sales, so there is still much to be done to restore the sector to full health.

On the net, however, the figures are healthy and strong, and very encouraging.

29/4/15: Irish Retail Sales 1Q 2015

As I mentioned in a related post (http://trueeconomics.blogspot.ie/2015/04/28415-irish-retail-sales-march-2015.html), covering monthly data for Irish retail sales, last night, we can take a look at Q1 data comparatives for the sector based on 3mo averages for each corresponding quarter.

Here are the results y/y:

Good news is that overall only two sectors posted declines in Value of retail sales index in 1Q 2015 compared to 1Q 2014. These are both related to the decline in prices of fuel and wholesale prices declines for the Department Stores sales. All categories posted increases in volume of sales.

Large y/y increase in sales were recorded in 1Q 2015 in:

• Motor Trades: up 22.7% in volume and up 20.6% in value of sales
• 'Other sales': up 15.8% y/y in volume and up 6.8% in value
• Books, newspapers, stationery & other: up 13.8% y/y in volume and up 5.7% in value
• Household equipment: up 11.8% in volume and up 7.1% in value
• Electrical goods up 11.8% in volume and 6.1% in value

As the result of this, Non food, ex-motors, auto fuel & bars sales rose 8.3% in volume and were up 3.6% in value terms compared to 1Q 2014. Food posted weaker sales growth at 4.2% y/y in volume and 2.3% in value.

Note: Retail Sales Activity Index is a simple average of Value and Volume indices

As chart above shows, in broader categories terms,

• All Retail sales index of value of sales rose 6.1% y/y in 1Q 2015, while volume of sales index was up 9.9%. Strong showing driven heavily by the motor sales.
• Core retails sales (ex-motors) were up 1.3% y/y in value terms and up 5.2% in volume terms in 1Q 2015.
• Stripping out motors, automotive fuel and bars, retails sales rose 2.8% in value terms and were up 6.0% in volume terms. Again, strong showing over the quarter.

Chart below presents 1Q 2015 index reading against pre-crisis peak for 1Q period:

As the chart above clearly shows, the problem of weak retail sales, compared to pre-crisis levels, remains. Only three categories of sales have regained their pre-crisis peaks as of the end of 1Q 2015 in volume of sales terms. No category of sales has managed to regain pre-crisis peaks in value terms.

In discretionary spending categories terms, relating to normal consumption (stripping out auto fuel, food and motors), things remain under water in both volume of sales and value of sales terms. So things are getting better, but remain ugly in the sector.

The picture for 1Q 2015 is consistent with weak, but improving demand side in the economy.

This positive side of the National Accounts story is at risk, as it reflects deflationary environment where households are experiencing improved real incomes on stagnant wages and disposable nominal incomes. Any uptick in inflation can easily derail the recovery in the sector in terms of volumes of sales, if consumers start withdrawing their demand on foot of reduced opportunities for value shopping. Any uptick in inflation coupled with a rise in interest rates will present a double squeeze on consumer demand through reduced real incomes and reduced incomes available to fund consumption after housing and debt financing costs are taken into account.

28/4/15: Irish Retail Sales: March 2015

So the Spring Statement (http://trueeconomics.blogspot.ie/2015/04/28415-there-is-spring-there-was.html) put quite an emphasis on domestic demand growth, while the retail sales data published today is not exactly encouraging.

Stripping out motor sales, and focusing on core retail sales:

• Seasonally adjusted index for value of retail sales fell from 98.0 in February 2015 to 97.1 in March 2015. March reading is now the lowest  for 6 months and below the 3mo average (1Q 2015 average) of 97.7.
• Seasonally-adjusted index for volume of retail sales also fell from 107.6 in February to 106.6 in March, posting the lowest reading in 4 months.
• Meanwhile, Consumer Confidence indicator from the ESRI was up in March at 97.8 compared to February reading of 96.1.

Some more longer-range comparatives: in 4Q 2014, value index was up 0.2% compared to 3Q 2014, but in 1Q 2015 it was down 0.48% on 4Q 2014. In 4Q 2014, volume index was up 0.69% compared to 3Q 2014, but in 1Q 2015 it was down 0.25% on 4Q 2014. Again, as with monthly changes, 1Q 2015 3mo average for consumer confidence index was up 2.54% which is below 3.9% increase in the index for 4Q 2014 compared to 3Q 2014.

Looking at unadjusted series gives us year on year comparatives basis. So again, for core retail sales (ex-motors):

• Value of retail sales was up 2.34% y/y in March 2015, having previously posted a 0.77% rise in February. A large chunk (just around 1/3rd) of March 2015 increase was down to March 2014 y/y drop of 0.77%. But 2/3rds of March 2015 rise were due to organic growth. Which is good.
• Volume of retail sales rose robust 6.1% y/y in March 2015, having posted growth of 5.04% y/y in February.
• On 3mo average basis, 1Q 2015 value index is at 91.2 which is up 1.3% y/y - again, good news, as value index performance has been weak due to weak prices. Volume 1Q 2015 index was up 5.2% y/y. As usual, Consumer Confidence broke the back of both retail sales indicators, rising 15.1% in 12 months through 1Q 2015.

Summary: People are hopping mad with confidence, buying rather more stuff in volume, but only on foot of finding value in prices. This is not too boisterous, but on the net not too bad either. Monthly trends are a bit more concerning with declines in both March figures and 1Q 2015 averages.

I will look at sectoral comparatives in the next post.

4/7/2014: Q1 2014: Domestic Demand dynamics

In the previous posts I covered the revisions to our GDP and GNP introduced by the CSO, top-level GDP and GNP growth dynamics, and sectoral decomposition of GDP.  These provided:

1. Some caveats to reading into the new data 
2. That the GDP has been trending flat between Q2-Q3 2008 and Q1 2014, while the uplift from the recession period trough in Q4 2009 being much more anaemic than in any period between 1997 and 2007. The good news: in Q1 2014, rates of growth in both GDP and GNP were above their respective averages for post-Q3 2010 period. Bad news: these are still below the Q1 2001-Q4 2007 averages.
3. Evidence that in Q1 2014, four out of five sectors of the economy posted increases in activity y/y. 

Now, let's consider Domestic Demand data. In the past I have argued (including based on econometric evidence) that Domestic Demand dynamics are most closely (of all aggregates) track our economy's actual dynamics, as these control for activities of the MNCs that are not domestically-anchored (in other words, they include effects of MNCs activities on Exchequer and households, but exclude their activities relating to sales abroad and expatriation of profits and tax optimisation).

Of the components of Domestic Demand:

• Personal Consumption Expenditure on Goods and Services stood at EUR19.915 billion in Q1 2014, which is up EUR42 million (yes, you do need a microscope to spot this - it is a rise of just 0.21% y/y. Good news is that this is the first quarter of increases in Consumption Expenditure after four consecutive quarters of decreases. Previously we had a EUR125 million drop in Personal Consumption Expenditure in Q4 2013 compared to Q4 2012.
• Net Current Government Expenditure stood at EUR6.614 billion in Q1 2014 which is EUR167 billion up on Q1 2013 (+2.59% y/y) and marks third consecutive y/y increase in the series.  Over the last 6 months, Personal Consumption fell by a cumulative EUR83 million and Government Net Current Expenditure rose EUR617 million. Austerity seems to be hitting households more than public sector?..
• Gross Domestic Fixed Capital Formation (basically an imperfect proxy for investment) registered at EUR6.864 billion in Q1 2014, up EUR191 million y/y. Which sounds pretty good (a 2.86% rise y/y in Q1 2014) unless one recalls that in Q4 2013 this dropped 11.35% y/y. Over the last 6 months Fixed Capital Formation is down EUR798 million y/y in a sign that hardly confirms the heroic claims of scores of foreign and irish investors flocking to buy assets here.
• Exports of Goods and Services, per QNA data, stood at EUR47.164 billion in Q1 1014, up strongly +7.41% y/y, the fastest rate of y/y growth since Q1 2011 and marking fourth consecutive quarter of growth. I will cover exports data in a separate post, as there is some strange problem with QNA data appearing here.
• Imports of Goods and Services were up too, rising to EUR37.635 billion a y/y increase of EUR2.086 billion.  
• Over the last 6 months, cumulatively, y/y Exports rose EUR4.970 billion and Imports rose EUR3.741 billion.
• Total domestic demand (sum of Personal Expenditure, Government Current Expenditure, Gross Fixed Capital Formation and Value of Physical Changes in Stocks in the economy) stood at EUR33.828 billion. This represents a y/y increase of just EUR335 million or 1.0%. This is the first quarter we recorded an increase since Q4 2013 saw a y/y drop in Total Domestic Demand of 3.83%. Over the last 6 months, cumulatively, Irish domestic economy was down EUR1.087 billion compared to the same 6 months period a year before.

The above are illustrated in the two charts below:

Lastly, let's take a look at nominal data, representing what we actually have in our pockets without adjusting for inflation. Over Q1 2014, nominal total demand rose by EUR499 million y/y, while over the last 6 months it is down EUR570 million y/y. So in effect all the growth in Q1 2014 did not cover even half the decline recorded in Q4 2013. One step forward after two steps back?..

Chart below summarises nominal changes over the last 6 months and 12 months.